Bell v. Hershey Co.

Appeal from the United States District Court for the Southern District of Iowa.

The opinion of the court was delivered by: Murphy, Circuit Judge.

Submitted: January 15, 2009

Before MURPHY and SMITH, Circuit Judges, and LIMBAUGH,*fn1 District Judge.

James Bell brought a purported class action in an Iowa court against five chocolate manufacturers for alleged violations of state antitrust laws. The manufacturers filed a notice of removal to the federal district court under the Class Action Fairness Act of 2005 (CAFA), and Bell moved to remand to state court. After concluding that the amount in controversy was below the federal jurisdictional minimum, the district court remanded the case for lack of subject matter jurisdiction. The manufacturers appeal, asserting that the district court erred by requiring them to prove to a legal certainty that Bell's claim exceeds the jurisdictional threshold. We vacate and remand.

Bell filed this class action against The Hershey Company, Mars, Inc., Masterfoods USA, Nestle USA, Inc., and Cadbury Adams USA, LLC on February 28, 2008. The suit alleged that the manufacturers violated the Iowa Competition Law, Iowa Code Ann. §§ 553.4 and 553.5 (West 1997), by conspiring to "(a) fix, raise, maintain, and stabilize the price of chocolate; and (b) caused Named Plaintiff and other members of the Class to pay higher and supra competitive prices for chocolate."

The district court observed that Bell's petition was "clearly designed" to evade federal jurisdiction.*fn2 The petition alleged in relevant part: "[T]he Class Action Fairness Act does not apply and no federal court jurisdiction is available as a basis for removal." Although Bell conceded within the petition that two of the three requirements to support jurisdiction under CAFA were satisfied (minimal diversity and 100 or more class members), he contended that the amount in controversy was $4.99 million, just short of the $5 million jurisdictional threshold. See Class Action Pet. ¶ 14(d) ("[P]laintiffs limit compensatory damages to $3.75 million. Attorney's fees sought by plaintiffs in this lawsuit are limited to no more than $1.24 million. Combined, the plaintiff class seeks less than $5 million in compensatory damages."). Bell included these figures despite an Iowa prohibition on pleading damages with specificity. See Iowa R. Civ. P. § 1.403(1) ("[A] pleading shall not state the specific amount of money damages sought . . . . The specific amount and elements of monetary damages sought may be obtained through discovery.").

Bell arrived at a figure below the jurisdictional minimum through permissible control of the class composition, the assumed price fixing overcharge, and the duration of the class period. Although he alleged violations of Iowa law that presumably applied to all indirect purchasers of chocolate in the state, he limited the putative class to those who purchased chocolate in eight specified counties, collectively representing "less than 8.33% of the average population of Iowa." Bell also based his compensatory damages claim on an assumed "5% price-fixing overcharge" although higher figures are contained elsewhere in the petition.*fn3 Bell's compensatory damages calculation is only based on a "six-year Class Period from 2002 through 2007" even though the petition otherwise pleads a class period that extends at least through February 2008.*fn4

Defendants believed that revising the assumed price fixing overcharge and class period to conform with facts alleged elsewhere in the petition would yield an amount in controversy in excess of the jurisdictional minimum. For instance, by relying on the Cadbury and Wall Street Journal information and using a 5.1% rather than a 5% price fixing overcharge the amount in controversy would be $5.04 million. Similarly, assuming a fixed amount of damages per month and relying on the 73 month definition of the class period to perform the compensatory damages calculation, rather than the 72 month period utilized by Bell in the computation, yields an amount in controversy in excess of $5.04 million. Relying on CAFA's relaxed diversity jurisdiction requirements, the manufacturers filed a notice of removal to federal district court.

Bell moved to remand to state court, and the district court granted the motion. Although noting the Iowa prohibition on pleading damages with specificity, the district court concluded that its "task is not to determine compliance with state rules of procedure. Rather, its job is to determine whether CAFA's amount in controversy has been met." The district court applied a legal certainty test in deciding the motion, and after it found that the manufacturers had failed to prove to a legal certainty that the amount in controversy exceeded the jurisdictional minimum, it remanded the case for lack of subject matter jurisdiction. This interlocutory appeal followed.

We review de novo a district court's order to remand a removed case for lack of subject matter jurisdiction. In re Minn. Mut. Life Ins. Co. Sales Practices Litig., 346 F.3d 830, 834 (8th Cir. 2003).

The proponent of diversity jurisdiction has the burden of proving that the amount in controversy exceeds the jurisdictional minimum. Advance Am. Servicing of Ark., Inc. v. McGinnis, 526 F.3d 1170, 1173 (8th Cir. 2008). This is a straightforward task in the usual matter because the plaintiff is the master of the complaint. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 290 (1938). Thus, where the plaintiff is the proponent of diversity jurisdiction, the amount in controversy controls unless the defendant can establish to a legal certainty that the claim is for less than the jurisdictional minimum. Id.

Where the defendant seeks to invoke federal jurisdiction through removal, however, it bears the burden of proving that the jurisdictional threshold is satisfied. Minn. Mut., 346 F.3d at 834. This can be a complex task where, as here, the plaintiff prefers to litigate in state court. See Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir. 2005) ("The complication is that a removing defendant can't make the plaintiff's claim for him . . . ."). The party seeking to remove in the non CAFA context in our circuit "has the burden to prove the requisite amount by a preponderance of the evidence." Advance Am., 526 F.3d at 1173; See also James Neff Kramper Family Farm P'ship v. IBP, Inc., 393 F.3d 828, 831 (8th Cir. 2005); Minn. Mut., 346 F.3d at 834; Kopp v. Kopp, 280 F.3d 883, 885 (8th Cir. 2002). This standard applies regardless of whether "the complaint alleges no specific amount of damages or an amount under the jurisdictional minimum." Minn. Mut., 346 F.3d at 834. Once the removing party has established by a preponderance of the evidence that the jurisdictional minimum is satisfied, remand is only appropriate if the plaintiff can establish to a legal certainty that the claim is for less than the requisite amount. Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006).

The enactment of CAFA did not alter the proposition that the plaintiff is the master of the complaint. See Brill, 427 F.3d at 449. Nor did it impact the traditional rule that the party attempting to remove bears the burden of establishing subject matter jurisdiction. Blockbuster, Inc. v. Galeno, 472 F.3d 53, 58 (2d Cir. 2006). The precise burden that applies to a removing defendant in the CAFA context has not been defined in this circuit.

Despite the Iowa prohibition on pleading damages with specificity, Bell urges us to conclude that where a complaint specifies an amount in controversy below the jurisdictional minimum, the party seeking to remove under CAFA must establish to a legal certainty that the amount claimed exceeds the jurisdictional threshold.*fn5 For support, Bell relies on several other circuit decisions announcing such an elevated removal burden. See, e.g., Lowdermilk v. U.S. Bank Nat'l Ass'n, 479 F.3d 994, 1000 (9th Cir. 2007) (where plaintiff pleads damages under jurisdictional minimum, party removing under CAFA must prove jurisdictional facts to legal certainty); Morgan v. Gay, 471 F.3d 469, 474 (3d ...

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